Some knew it was coming

My Dad predicted the current super recession. Knowing that, your next question to me should be, “Why ain’t you rich”.

The big problem with his prediction was that he started predicting it in the early 1960’s – or maybe even before that when I wasn’t listening. It still hadn’t really happened when he died in 1992. However, the perception that it could happen colored his economic activity all his life – mine, too probably. We had some near misses, but he always dismissed them as minor events compared to the coming of the real thing.

He gained this insight by experiencing its predecessor that started with a “crash” in 1929 after he graduated from college. He finally got the experience, capital ($4000 borrowed on his life insurance) and confidence to start his own business in 1938. The time between the crash and the gradual awakening with WWII must have been terrible and enlightening. He prospered cautiously for many years, but he was always looking over his financial shoulder.

I suspect that we will see a parallel in the boat business as well as others as we go forward. Those of you who manage to plow through the current major unpleasantness surely will have a different appetite for risk. Entrepreneurs take risks. Some take really big risks. A very few of those big risk takers get really rich. The odds are not in their favor, particularly long term.

The old way of doing boat business creates a roller coaster. Dealers were induced by boat builders and their own enthusiasm to take on way too many new boats. The last “boating recession” (20+ years ago) failed to cure this, but it certainly pushed it back a number of years- by wiping out 50% of the dealers. I used to say that there were some builders who were careful of their dealers’ balance sheets, but I have come to the conclusion in the last few years that there are only some who are less reckless with dealer credit. I’m sure we will have wiped out more than 50% of dealers this time when it’s over. I also think the survivors will remember this beating vividly.

Dealers have to share the blame for yielding to easy credit and low inventory turnover. Having been one, I know how hard it is to resist all that neat new fiberglass and the high pressure suasion of the builders’ reps. Most of us paid little attention to Fannie and Freddie and Barney.

I think (and I must admit, hope) that dealers take a hard line toward any builders that push more inventory than their dealers want to buy. I hope there is a move in the boat builder community to look for the dealers that make their line look good with excellent customer service in very capable facilities. Note that I said “capable” not necessarily “glamorous” or expensive. I also hope these “good” builders revamp production methods to avoid needing forecasts so far out — even if it costs them some “throughput”. Dealers need less in stock and quicker access to exactly what the customer wants.

I would like to see dealers worrying more about fixing and refurbishing their customers’ older boats like a boatyard and less interested in replacing them every three years with more mass produced fiberglass. The landfills are getting full and fiberglass doesn’t rot. Manufacturers will need to build high quality boats in numbers that the market can absorb and with fewer bells and whistles to keep the prices down. Dealers can profitably add the unique bells and whistles that the buyer really desires. If you have had occasion to delve personally into the wiring harnesses and hidden machinery layouts of fancier boats, you probably have nightmares about it.

We do the roller coaster to ourselves every 20-25 years, and it is painful for all. Let’s hope we learned something we can take forward this time.

I really don’t see the market returning to a flawed “normal”. I am an optimist who believes that this more grievous recession may inoculate us against future excesses — at least for a generation or so. There are less dealers around, and the good ones should be able to make some money. The number of boaters is holding up well. If surviving dealers are smart, they will continue to look over their economic shoulders. Greed and Washington are still with us.

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About John Underwood

John Underwood currently serves on the National Boating Safety Advisory Council for the US Coast Guard. He is past chairman of the Marine Retailers Association of America. He owned Lockwood Marine for 20 years. For more info, click Contributors on the main menu.

2 thoughts on “Some knew it was coming

  1. Lots of great comments/insight, as usual.
    Have some advice as well, if I might.
    Solid retail marine businesses have numerous profit centers and do not allow “boat sales” to dictate success for the entirety.
    The King of Success is still,always has been, and always will be, SERVICE, and above all, CUSTOMER SERVICE.
    I would maintain that most good Boat Manufacturers have come to that conclusion as well.
    So, it behooves us to do business with these folks.
    And, while we’re at it, wouldnt it be great if we could make renewed efforts, “surviving” dealers & manufacturers alike, to work together?
    In fact, it absolutely behooves us to do that seeing as we a most defintely a “leaner” Industry.
    We MUST conduct business in a smarter, more diligent manner.
    Best to all, Ed

  2. Just before the economy tanked, my father suggested I buy mortgage insurance in case my property lost value. I poo-pooed it thinking that property would only appreciate. Lesson–listen to your elders (excpet now I’m the elder).

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